Personal insolvencies fell last year, but experts have warned that they are unlikely to do so again in 2008.

More than 25,000 people became insolvent in the last three months of 2007 - a 16.4 per cent drop compared to the same period in 2006, the Insolvency Service has said.

The overall total for 2007 fell just below the previous year’s record of 106,645.

This is the first time insolvencies have decreased since 1996, but the effects of the credit crunch, and new insolvency laws are likely to push this figure up again in 2008.

“We are forecasting small increases in unemployment as the economy slows, so we would expect the insolvency data to pick up over the course of 2008,” said George Johns, an economist at Barclays.

“There is also a risk that the effects of the credit crisis will exacerbate the magnitude of any future increases, as subprime borrowers struggle to refinance loans as they roll off more favourable deals.”